How to buy your first grown-up watch - CNN.com

How to buy your first grown-up watch - CNN.com:



'via Blog this'

My Investing "Aha Moment" - yong888@gmail.com - Gmail

My Investing "Aha Moment" - yong888@gmail.com - Gmail:

Probably the most frequent question I am asked about buying shares is where do I find my investing ideas.
 
Do I, for instance, use some fancy filter to screen the vast array of available shares on the market for prospective purchases? Or do I furtively steal a glance at charts when I think that no one is looking over my shoulders?

Then again, do I spend hours on end scouring the many financial news channels on TV for ideas about what is currently hot?

It is none of the above. In fact, I have never really given the matter that much thought. That is, until fairly recently.

Two wooden trunk boxes
 
My "Aha Moment" came when I was fortunate enough to attend a reading of "Two Wooden Trunk Boxes" at The Arts House by renowned author Zhou Can.

The prolific Chinese writer together with academic Dr Tan Chee Lay, were discussing the inspiration behind his seminal work about two very old wooden cases.

What I found interesting was that different people will take away something quite different after reading the same piece of prose.

For me, it seemed fairly straightforward. It was about owning something that was considered by many to be old and ugly that has over time become something beautiful and valuable.

Investing for me is a bit like Zhou Can's "wooden trunk boxes".

When ugly is beautiful

When I invest, I specifically look for ugly and unwanted shares. Some people might call that value investing. But for me it is simply about looking for quality shares that are unloved and, consequently, likely to be undervalued by the market.

Investing, in my book, should never be about buying into the latest fad. Warren Buffet once said: "Most people get interested in stocks when everyone else is".

But he went on to say: "The time to get interested is when no one else is. You can't buy what is popular and do well."

Buffett is essentially warning people to steer clear of popular stocks and the latest investment craze. His advice applies not only to specific shares but also for sectors and geographic regions too.

The secret to successful investing is about buying undervalued shares in businesses that you understand. Your understanding should ideally go beyond a superficial knowledge of the business too. It is vital that you delve deeper into the ways that the business makes money.

Let me explain.
 
Back in 2009, banks were massively unloved. That applies to not only banks here in Singapore but also elsewhere in the world. But it is precisely because they were unloved that investors should have looked more closely at the sector for their investing opportunities.

Look forward, not back
For instance, in 2009 DBS Group was valued at around 40% below its book value. At the time, the shares were trading at around S$4 a pop because not many people wanted to own them. 

Today, those same shares would set you back around S$9.50, which values the bank at a 30% premium above its book value.

You might, of course, point out that hindsight is a wonderful thing. But investors with foresight in 2009 would have realised that Singapore's biggest bank, which was trading at a significant discount to its book value, was a steal.

Peter Lynch once said that you can't see the future through a rear-view mirror. He is right.

Investing is about looking forward, not back. And currently I can see at least half a dozen sectors that are unloved. Can you?

Foolish best

David Kuo
Director, Motley Fool Singapore

'via Blog this'

This stock market needs a correction - MarketWatch First Take - MarketWatch

This stock market needs a correction - MarketWatch First Take - MarketWatch:



'via Blog this'

5 warning signs of a stock market bubble - Mark Hulbert - MarketWatch

5 warning signs of a stock market bubble - Mark Hulbert - MarketWatch:

1. Volume of IPOs. There were 123 new issues in the first three months of 2000, according to University of Florida finance professor Jay Ritter. There were 58 in the same period this year, according to Ritter.

2. IPO returns. In 2000’s first quarter, the first-day return of the average initial public offering was an incredible 96%. During the first three months of 2014, it was 22%.

3. Dividend premium. The professors, in a study, focused on the relative valuations of two groups of stocks: those of established, dividend-paying companies versus those of more speculative firms. They theorized that, as exuberance reaches extreme levels, investors become bored by established, dividend-paying companies. In March 2000, speculative companies on average had a 43% higher valuation than the dividend-paying stocks. The comparable premium today for stocks in the S&P 1500 index is 26%, according to data from FactSet.

4. Share turnover. Over the first three months of 2000, NYSE-listed stocks’ turnover rate was an annualized 89%. For the first quarter of this year, it was 58%.

5. Share of corporate cash derived from equity issuance. Corporations increasingly turn to the equity markets to raise money during periods of speculative excess. The equity share stood at 20% for the first three months of 2000. The most recent data from Wurgler, covering three months in late 2013, showed the equity share was 11%.

The bottom line? None of the five sentiment indicators shows the market today to be as overheated as it was in March 2000.'via Blog this'